Your Will be done! Or will it?

      There is a common misperception that the Will controls the entire distribution of a person’s assets; however, this commonly held belief is not accurate.  The Will only controls the distribution of probate assets.  There are two types of assets included in one’s estate: probate and non-probate assets. Probate assets are those that do not have a right of survivorship with a joint owner or a beneficiary designation that directs which beneficiaries are to receive the asset upon death. 

                For example, if a married couple owns a home as husband and wife, also known as tenancy by the entirety, or a bank account jointly, when the first spouse passes away, his or her half ownership interest in the property or bank account immediately vests in the surviving spouse outside of the probate process. The same applies to a life insurance policy in which there is a named beneficiary.  When the named insured passes, the listed beneficiary receives the death benefit outside of the probate process.  Jointly owned real estate with a right of survivorship, jointly owned bank or brokerage accounts, life insurance, 401(k), IRA’s and bank or brokerage accounts with a beneficiary designation are all examples of non-probate assets. 

                So why is this important? Let’s say person A executes the most beautiful, valid Will in the world that leaves all of person A’s assets to a Person B, but Person A owns all of their assets jointly with Person C.  Who do you think inherits all of person A’s assets? Yes, you are correct if you said person C.  Person B receives nothing upon the death of person A and everything goes to Person C. Once instance in which I often see someone leave assets to another beneficiary unintentionally is when a parent adds a child’s name to their bank accounts so that the child can “write checks” for them. The parent often does not realize that when he or she passes away, the child whose name is on the account will inherit the account balance upon their death along with whatever probate assets will be coming their way under the parent’s Will. As you can imagine, an unintended and inconsistent estate distribution can lead to Will contest, ensuing litigation, and broken family bonds that are often irreparable.

                The reality is that the everyday person does not think about or necessarily know the difference between probate and non-probate assets. This is the reason why it is important to work with financial and legal advisors to ensure your estate plan is exactly what you intend it to be.
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